Merkel’s popularity could sink coalition partner

Lower Saxony, Greece pose risk to chancellor’s re-election

WASHINGTON (MarketWatch) — German Chancellor Angela Merkel’s soaring popularity may have some unintended consequences in a key state election this coming Sunday that could complicate things for her in national elections later this year.

Voters in the bellwether state of Lower Saxony will decide whether to install a new coalition of Social Democrats and Greens that could prefigure a national government or to return the Christian Democrats to power under the current prime minister — a rising political star with the unlikely name of David McAllister.

Reuters

German Social Democrat leader Peer Steinbrück

But Merkel’s high approval ratings have come partly at the expense of her junior coalition partner, the Free Democrats. If that party doesn’t meet the 5% hurdle to get into the Lower Saxony state Parliament, their national leader, Philipp Rösler, could lose his job and make it even harder for the Free Democrats to get into the national Parliament in the fall, jeopardizing Merkel’s hold on power.

And if Merkel, who is actively campaigning for McAllister in Lower Saxony, helps boost him to victory, the defeat for Social Democrats could conceivably force their candidate for chancellor, Peer Steinbrück, to step down after a series of spectacular gaffes has cratered his poll ratings.

All this takes place as Greece slips further in the direction of total breakdown, with nonstop strikes paralyzing the economy and increasing political violence against the austerity policies in that country.

Merkel has been the main backer at the European level for those policies, and a social or economic collapse in Greece could make the political situation in Germany even more volatile.

Social Democratic leaders have been quick to dismiss speculation that a loss in Lower Saxony could force Steinbrück out of the race, and most analysts think the party would be better off trying to repair his image than picking somebody else now.

Reuters

German Chancellor Angela Merkel.

But the former finance minister, who polled a 59% favorability rating when he was chosen as chancellor candidate in October, has seen his personal approval plunge to 36% in the most recent polls.

For some unfathomable reason, Steinbrück, already under fire for accepting more than a million dollars in speaker’s fees while a sitting member of Parliament, felt compelled to argue two weeks ago that the chancellor’s annual salary of about $400,000 is too low because many bank managers make more.

On top of that, he said Merkel was so popular because she benefited from a “women’s bonus,” a statement that offended not only Merkel’s supporters but voters in his own party.

Steinbrück’s plunging poll numbers are dragging down the party, making it difficult to envisage a Social Democratic-Greens coalition in Berlin even as the Greens continue to surge with about 15% in the polls and the Free Democrats continue to implode.

Polls still favor a “red-green” coalition winning in the Lower Saxony elections, but the race has tightened and many feel it’s too close to call given the shaky situation of the Free Democrats.

Reuters

Lower Saxony Prime Minister David McAllister.

McAllister, who was raised in Germany with dual citizenship after his Scottish father came to the country as a soldier during the war and stayed on as a civil servant with the British forces, has not been unpopular as prime minister and his Christian Democrats should emerge as the largest party in the state elections. However, the Greens have been adamant that they would only join the Social Democrats in a coalition.

Merkel’s own popularity has reached a favorability rating of nearly two-thirds of German voters. But the Free Democrats have floundered so badly — with some polls showing them at only 2% — that Christian Democrats who sometimes vote for the junior coalition partner just to make sure it meets the 5% hurdle for parliamentary representation are not likely to risk wasting their votes.

Lower Saxony is the last big election in Germany until the Bavarian state elections in September, just a week before the national elections.

In Greece, meanwhile, labor unions continue to protest the government’s austerity policies with massive and prolonged strikes in transit and other public services. Firebombs were set off in recent days at the homes of some politicians and several journalists who have expressed support for government policies and an assault rifle was fired into the party headquarters of Prime Minister Antonis Samaras.

The Greek leader was in Berlin last week to address a business conference and met with Merkel. The two talked to the press before their meeting, not afterwards, with Samaras saying he was “optimistic” about Greece’s progress and Merkel allowing as how she was “naturally interested” in hearing about it.

Whether this meant there was some disharmony between the two, as some German commentators suggested, or that the canny Merkel simply wanted to avoid any Greek headlines ahead of an uncertain state election, Greece will continue to pose a significant risk for Merkel as the September elections near.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information.
All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only.
Intraday data delayed at least 15 minutes or per exchange requirements.